Following the end of the tax year, thoughts turn towards notifying HM Revenue & Customs (HMRC) of benefits in kind (BiK) employees or directors have received in the tax year.
Employers must complete a P11D each year for any employee or director who has received taxable BiK, if the employer has not opted to ‘payroll’ these benefits – in both situations a P11D(b) is required.
What is a P11D?
Any taxable BiK provided to employees must be reported to HMRC – you are also required to declare and pay any Class 1A National Insurance due.
Taxable benefits can be reported through your payroll, or online at the end of the tax year by completing an online form called a P11D.
When an employer opts to ‘payroll’ certain employee benefits by taxing them through regular pay, those benefits:
- Do not need to be included on a P11D;
- However, you do still need to complete a P11D(b) to report any Class 1A National Insurance due.
For each employee where you have provided BiK that were not payrolled:
- A P11D must be submitted to HMRC; and
- You will also need to complete and submit a P11D(b) to HMRC so you can pay the Class 1A National Insurance due.
Deadlines and penalties
By 6 July, after the end of the corresponding tax year, you must have reported expenses and BiK to HMRC, given your employees a copy of the information and reported the total Class 1A National Insurance owed.
Any Class 1A National Insurance must be paid by 22 July (or 19 July if paying by post).
You will receive a penalty of £100 per 50 employees for each month or part month your P11D(b) is late and will also be charged penalties and interest for any late payments to HMRC.
Expenses and benefits to report on
Put simply, taxable BiK are assets or expenses (with a private element) that are owned/contracted to the employer, then provided by the employer to the employee.
BiK commonly include items such as :
- Company cars;
- Company vans;
- Health insurance; and
- Accommodation (if not covered by an exemption.)
Different Benefits, Different Rules
What you need to report and pay can differ based on the nature of the benefit or expense. Check out HMRC’s Expenses and benefits: A to Z for more details.
Watch out for specific categories like annual staff parties and trivial benefits when it comes to working out tax due and exemptions.
When considering the BiK related to events, you might want to take a look at our blog for more details on the conditions of the annual event exemption – as a reminder the event must be:
- Open to all employees;
- An annual event, such as a Christmas party or summer barbecue; and
- Cost £150 (including VAT) or less per person (see the above blog if you have more than one annual event in the year).
Providing employees with smaller gifts and perks (such as wine, store vouchers, chocolates and other food items) often comes under the umbrella of ‘trivial benefits’ – these are essentially tax-free gifts for employees.
The concept of a ‘small gift’ can be interpreted in different ways, which is why HMRC introduced specific guidance to ensure clarity on what constitutes a trivial benefit:
- It costs £50 (including VAT) or less to provide;
- It isn’t cash or a cash voucher;
- It isn’t a reward for their work or performance; and
- It isn’t in the terms of their contract or part of a salary sacrifice arrangement.
Our blog on Trivial Benefits provides more information on the rules around this topic as well as information on the possibility of PAYE Settlements agreements if the gift is found to be taxable.
Record keeping
Don’t forget to keep a record of all expenses and BiK you provide to your employees. HMRC may ask for evidence of how you accounted for each expense or benefit at the end of the tax year.
You must keep records for 3 years from the end of the tax year they relate to.
Mandating reporting via payroll software
Currently, you have the option to either report taxable expenses or BiK to your employees through your payroll, or online at the end of the tax year. However, it should be noted that most BiK, Income Tax and Class 1A National Insurance Contributions will need to be reported to HMRC via your payroll from April 2027 (this was meant to be from April 2026, but has been delayed).
Regardless of payroll size, this change will significantly impact most employers who currently complete and file P11D and P11D(b) forms.
How M+A Partners can help
Our team of experts are ready to support you with your reporting requirements, they can assist, for example, with P11D or P11D(b) forms, PAYE Settlements or dealing with your payroll. Get in touch with your usual contact, or reach out to me using the details below, to find out how we can help your business.
